Massive Reversal Incoming? USDCAD Showing Exhaustion Signals!

anteontem

(Apologies if the video is hard to understand—I bit my tongue during boxing sparring this morning!)

USDCAD has been on an incredible 17-week rally, but the price now appears extremely overextended and is showing signs of exhaustion.

Yesterday's NFP report brought a huge upside surprise, fueling a strong USD rally against all major currencies. While EURUSD, GBPUSD, NZDUSD, and AUDUSD all hit multi-year lows, USDCAD initially spiked higher but then sold off sharply, closing the day just above 1.44.

This marks the first clear sign of buying exhaustion—despite USD strength across the board, USDCAD failed to make new highs.

Additionally, this week’s candle formation caught my eye. It looks like a classic hanging man pattern, which typically appears at the top of a move, signaling an imminent reversal.

Zooming into the daily charts, we can see a clear distribution range forming, with sideways price action after a strong rally. The MACD is showing divergence, and recent price increases have been accompanied by negative volume—another strong indicator of a potential reversal.

As explained in the video, I see two likely scenarios for entering this trade:

False Breakout: A spike above the distribution range, potentially towards or just above 1.45, followed by a sharp sell-off. This would be my preferred entry.

Big Red Candle: A strong bearish candle early next week, signaling it’s time to enter short.

For this position, my first target is the previous monthly resistance at 1.405, and my second target—more likely—is 1.385, which is now a support level.

While I expect some bounce at these levels, I believe the longer-term move will see USDCAD fall back into its range, with a potential drop toward 1.32 very much on the cards.

Let me know your thoughts below!